My in-laws are that way. DH is totally NOT (obviously I hope) - we don't spend a lot of time around them, but when we do I just mostly follow his cue and let it pass. And wait till we get home. But I've had a lot of practice, probably way too much, pretending everything's okay when it's very much not.
I'm 1/4 Chinese but don't particularly look it. Growing up, my parents vocally supported civil rights but quite properly made it clear that it wasn't about us. It wasn't until I read Loving v Virginia when I was in law school and mentioned it to my mom, that she told me that she and my dad would've preferred to get married at a church in Virginia, but legally couldn't. I was floored.
So it was with that in mind that once, after probably one too many glasses of wine, when DH's cousin made a remark at the dinner table, that I let slip the line I'd been keeping inside for a while: "It's amazing the things people will say when they assume you're white." 
ETA: But we have no children. That makes it all very different. I think probably if we did, I'd figure that kids are going to hear that stuff sooner or later, and family occasions are probably as good a time as any to have to explain racism to a child.
Last edited by OakLeaf; 11-25-2012 at 05:22 AM.
Speed comes from what you put behind you. - Judi Ketteler